Coal-fired power plants are facing increasing financial distress due to low prices in the Texas electricity market, a trend that is unlikely to reverse, according to a new report from the Institute for Energy Economics and Financial Analysis, The Beginning of the End.

The pressure on coal is coming primarily from cheap natural gas and low-cost renewables, and to a lesser extent environmental regulations, according to IEEFA.

The report evaluated seven large coal plants owned by merchant power producers and public power utilities. They total more than 8 gigawatts of capacity, about 40 percent of the total coal capacity in Texas.

“IEEFA considers it highly probable that these plants -- and many like them -- will be retired, a view that is consistent with those of other independent energy-market observers,” the report states.

Natural gas is the primary driver of electricity prices in Texas. Record-low prices for gas are the main reason coal is losing its competitive edge. Natural gas also now constitutes the dominant generation source in Texas, according to the Energy Information Administration.

Source: IEEFA

While gas dominates, renewables, especially wind, are also playing a more important role. With additional transmission lines, Texas has been able to reduce its wind curtailment and wind has averaged more than 16 percent of total energy production for the first half of 2016.

The changing energy mix is not good news for coal in Texas. Capacity factors for coal-fired power plants are down considerably, according to IEEFA, and many generators are already writing off billions in losses.

Source: IEEFA

Coal was responsible for nearly 40 percent of the total energy generated a decade ago, a figure that has dropped to 25 percent in the first half of 2016. In recent years, some of the plants have been shuttered for winter when electricity demand is lower, and more coal plants are facing seasonal mothballing.

Source: IEEFA

“There is no reason to expect that the generation at any of these coal-fired generators will rebound significantly,” the researchers wrote. “The discussion should shift now to how to phase out these plants, what to replace them with, and how to retrain their workers.”